May 07, 2020
JACKSONVILLE Fla., May 7, 2020 – FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its first quarter 2020 results.
First Quarter 2020 Results
On a GAAP basis, revenue increased 50% to $3,078 million, primarily driven by the July 31, 2019 acquisition of Worldpay, Inc. (Worldpay). Net earnings attributable to common stockholders was $15 million or $0.02 per diluted share.
On an adjusted basis, organic revenue growth increased 2% over the prior year period. Adjusted EBITDA margin expanded by 510 basis points (bps) over the prior year period to 40.5%, primarily driven by the acquisition of Worldpay and associated expense synergies. Adjusted net earnings was $802 million or $1.28 per diluted share.
“As a critical infrastructure provider to commerce and the financial world, we remain intensely focused on protecting our employees and continuing to meet the needs of our clients during this time of worldwide uncertainty,” said Gary Norcross, FIS chairman, president and chief executive officer. “In challenging times like these, we are very pleased with the strength and durability of our business model. We continue to invest and innovate across our broad portfolio of banking, capital markets and merchant solutions in order to help lift our clients and communities while continuing to deliver value to our shareholders.”
FIS continued to realize revenue and expense synergies during the first quarter of 2020. Teams across the Company continued to execute on synergy workflows and to identify additional opportunities for both revenue and expense synergies.
The Company achieved annual run-rate synergies exiting the first quarter 2020 as follows:
As a result, the Company reiterated its previously-announced revenue synergy targets and increased its expense synergy target as follows:
Revenue synergy targets on an annual run-rate basis:
Expense synergy target on an annual run-rate basis:
Balance Sheet and Cash Flows
As of March 31, 2020, cash and cash equivalents totaled $1,373 million, and debt outstanding totaled $20,377 million with an effective weighted average interest rate of 1.9%.
First quarter net cash provided by operating activities was $383 million, and free cash flow was $539 million. Additionally, FIS paid dividends of $216 million during the quarter.
The Company remains committed to reducing its leverage incurred in the Worldpay acquisition while ensuring ample liquidity. Given the impacts associated with the ongoing COVID-19 pandemic, the Company now expects to extend the time period to achieve its target leverage into 2021.
As of March 31, 2020, the Company had $3,018 million of available liquidity, including $1,373 million of cash and cash equivalents and $1,645 million of capacity available under its revolving credit facility.
FIS has been carefully monitoring and assessing the effects of the ongoing COVID-19 pandemic as conditions continue to evolve, and our thoughts are with the individuals and families who have been affected. Since the beginning of the pandemic, the Company has taken several actions to protect its employees while maintaining business continuity, including implementing its comprehensive Pandemic Plan. The Pandemic Plan includes site-specific, service and client plans as well as travel restrictions, medical response protocols, work from home strategies and enhanced cleaning within our locations. As a critical infrastructure provider for the global economy, FIS continues to operate around the world to serve our clients.
Prior to the impacts from COVID-19 spreading across the globe, FIS achieved strong revenue growth. As U.S. and foreign governmental authorities imposed social distancing, shelter-in-place or total lock-down orders, spending declined, most notably in travel, restaurants, entertainment, and retail, resulting in a rapid deterioration in payments volume and transaction trends on a worldwide basis beginning in March, 2020 which adversely impacted, and continues to adversely impact, revenue in our payments businesses that earn transaction based fees. Revenue is primarily being impacted by declines in payment processing volumes within our Merchant Solutions segment as well as lower issuer processing, debit network and account transaction volumes within our Banking Solutions segment. However, we have continued to prioritize investments and products that help address the needs of our clients in order to increase the Company’s potential to resume strong revenue growth following the pandemic.
In response to COVID-19, we are taking several actions to manage discretionary expenses, including limiting travel, reducing incentive compensation and decreasing third-party spending as well as accelerating automation and functional alignment across the organization. In addition, the spread of COVID-19 has caused us to modify our business practices (including restricting employee travel, developing social distancing plans for our employees and cancelling physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or as we determine are in the best interests of our employees, clients and business partners. Where government lockdowns have prohibited or slowed down certain functions at specific locations, FIS has outfitted employees to provide certain of such services from home or transferred such work to other locations. In addition, we have recently extended higher than usual levels of credit to our merchant clients as part of funds settlement in connection with payments to their customers, for, among other things, refunds for cancelled trips and events. This has not had a material impact on our liquidity or results of operations at this point although certain of our merchant clients have ceased doing business, at least for a period of time, and we continue to monitor its impact on our liquidity, results of operations and financial condition.
We have continued to innovate to help our clients through the COVID-19 pandemic. In particular, we have leveraged our Real Time Lending service to help banking clients process loans under the CARES Act and are assisting a number of U.S. states to enable online purchasing of food for Supplemental Nutrition Assistance Program (SNAP) benefit recipients under a pilot program run by the U.S. Department of Agriculture (USDA). We have also helped our clients and communities through this period by providing virtual terminals, temporarily eliminating minimum transaction amounts and waiving certain fees for small merchants, contributing masks and supplies to the communities in which we do business, and donating prepaid cards to military families and children in need.
For its employees, the Company has expanded sick leave for employees affected by COVID-19, expanded telemedicine internationally, provided special pay for certain employees involved in critical infrastructure who could not work from home, and expanded its FIS Cares program to benefit employees in need around the world.
FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EST) Thursday, May 7, 2020. To access the webcast, go to the Investor Relations section of FIS’ homepage, www.fisglobal.com. A replay will be available after the conclusion of the live webcast.
FIS is a leading provider of technology solutions for merchants, banks and capital markets firms globally. Our more than 55,000 people are dedicated to advancing the way the world pays, banks and invests by applying our scale, deep expertise and data-driven insights. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index.
FIS Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting in the United States. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, we have provided certain non-GAAP financial measures.
These non-GAAP measures include constant currency revenue, organic revenue growth, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings, adjusted EPS, and free cash flow. These non-GAAP measures may be used in this release and/or in the attached supplemental financial information.
We believe these non-GAAP measures help investors better understand the underlying fundamentals of our business. As further described below, the non-GAAP revenue and earnings measures presented eliminate items management believes are not indicative of FIS’ operating performance. The constant currency and organic revenue growth measures adjust for the effects of exchange rate fluctuations, while organic revenue growth also adjusts for acquisitions and divestitures, giving investors further insight into our performance. Finally, free cash flow provides further information about the ability of our business to generate cash. For these reasons, management also uses these non-GAAP measures in its assessment and management of FIS’ performance.
Constant currency revenue represents reported revenue excluding the impact of fluctuations in foreign currency exchange rates in the current period.
Organic revenue growth is constant currency revenue, as defined above, for the current period compared to an adjusted revenue base for the prior period, which is adjusted to add pre-acquisition revenue of acquired businesses for a portion of the prior year matching the portion of the current year for which the business was owned, and subtract pre-divestiture revenue for divested businesses for the portion of the prior year matching the portion of the current year for which the business was not owned, for any acquisitions or divestitures by FIS.
EBITDA reflects earnings from continuing operations before interest, taxes, depreciation and amortization.
Adjusted EBITDA is EBITDA, as defined above, excluding certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, adjusted EBITDA, as it relates to our segments, is presented in conformity with Accounting Standards Codification 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K.
Adjusted EBITDA margin reflects adjusted EBITDA, as defined above, divided by revenue.
Adjusted net earnings excludes the impact of certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the impact of acquisition-related purchase accounting amortization and equity method investment earnings (loss), both of which are recurring.
Adjusted EPS reflects adjusted net earnings, as defined above, divided by weighted average diluted shares outstanding.
Free cash flow reflects net cash provided by operating activities, adjusted for the net change in settlement assets and obligations and excluding certain transactions that are closely associated with non-operating activities or are otherwise non-operational in nature and not indicative of future operating cash flows, less capital expenditures. Free cash flow does not represent our residual cash flow available for discretionary expenditures, since we have mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP measures. Further, FIS’ non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP measures, including footnotes describing the specific adjustments, are provided in the attached schedules and in the Investor Relations section of the FIS website, www.fisglobal.com.
This earnings release and today’s webcast contain “forward-looking statements” within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about anticipated financial outcomes, including any earnings guidance of the Company, projected revenue or expense synergies, business and market conditions, outlook, foreign currency exchange rates, deleveraging plans, expected dividends and share repurchases, the Company’s sales pipeline and anticipated profitability and growth, as well as other statements about our expectations, beliefs, intentions, or strategies regarding the future, are forward-looking statements. These statements relate to future events and our future results, and involve a number of risks and uncertainties. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Any statements that refer to beliefs, expectations, projections or other characterizations of future events or circumstances and other statements that are not historical facts are forward-looking statements.
Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to include the following, without limitation:
Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition, results of operations and prospects. Accordingly, readers should not place undue reliance on these forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Except as required by applicable law or regulation, we do not undertake (and expressly disclaim) any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise.
For more information
Ellyn Raftery, 904.438.6083
Chief Marketing Officer
FIS Global Marketing and Corporate Communications
Nathan Rozof, CFA, 866.254.4811
Executive Vice President
FIS Investor Relations